Universal Basic Income still has a lot of questions to be answered, says new IEA report

Universal Basic Income (UBI) is gathering increasing support from both the political left and right but there is no clear consensus over what the best model might look like, argues a new report from the Institute of Economics Affairs.

‘Universal Basic Income: The State of Play in the UK Today’, written by IEA Head of Education Dr. Stephen Davies, is a timely analysis of the different UBI proposals being put forward by those across the political spectrum.

With austerity and rapid technological advancement in automation and artificial intelligence driving a new wave of interest in UBI, the idea is seen as a potential solution to an over-stretched welfare system and mitigating disruption in employment patterns and has been adopted in some form by several political parties, including the UK Labour and Green parties.

The report highlights the extent to which their proposals differ: while some have proposed using UBI to replace all other benefits and income supplements, and to ultimately trigger a radical transformation towards a ‘post-capitalist’ economic system; others advocate a far more limited scheme.

The report also categorises UBI schemes and those who tend to support them into four broad categories:

  • Liberal socialists: lean strongly towards a UBI kind of welfare system

  • Collectivist socialists: lean towards a Universal Basic Services model

  • Individualist or liberal free marketeers: lean towards some kind of UBI or other kind of guaranteed minimum income

  • Collectivist free marketeers: likely to lean towards a national based social insurance model such as in Singapore

The report notes that there are alternative proposals coming from the political left, including the idea of Universal Basic Services (UBS), which involves the state providing a whole range of essential services and goods either free of charge or at nominal cost and so providing the means for a minimum standard of living for all as a right. This is, however, rejected by left wing and liberal advocates of a UBI as being paternalistic, potentially coercive and antithetical to individual liberty, and confused in terms of the detail.

The author concludes that the state of the contemporary labour market and welfare system mean that the argument over UBI is not going to fade away quickly and that it is very likely that some kind of compromise or combination of the different ideas for reform will become popular. In that context there is a pressing need for those who are sceptical of both UBI and UBS to come up with not only criticisms and objections but their own ideas for reform, however radical.

Practical challenges to a Universal Basic Income:

  • Costs – All these proposals are very expensive, as much as a cost of £76 billion per annum (even if partly offset by the abolition of tax reliefs or the scrapping of existing benefits)

  • Setting the level of payment – If the UBI is set at a low level to reduce costs, then it is too low to live on; if it is set at a level that means one can live on it then the cost becomes unsupportable

  • Complexity of the welfare system – UBI proposals either create a universal supplement to existing benefits, adding another expensive layer to an already complex system, or replace it, promoting personal autonomy but leading to a lack of incentives

Political or moral challenges to a UBI:

  • Some argue that UBI is an individualist measure rather than a collectivist one

    • It is a measure that emphasises personal choice and individual life plans rather than shared participation in a collective enterprise and common good.

    • It does not threaten or challenge the fundamental principles of the capitalist form of political economy. Instead, it emphasises them and is designed to make a market economy work more efficiently.

    • UBI is seen as an essentially liberal idea rather than a socialist one. 

  • UBI cuts the connection between work and income

    • Some see this is a desirable result, arguing that UBI will free up our lives to focus on activities that make us happy

    • Others believe work is essential for a fulfilled life and freeing up people to live lives on unearned income will create resentment from those still working

Commenting on the report, IEA Head of Education and author of the report Stephen Davies said:

“Universal Basic Income is becoming more popular across many developed and developing nations, with political parties beginning to include some version of UBI in their policy platforms.

 “However, the UBI’s move from niche idea transition to serious policy proposal would require a number of questions to be answered, including how much the benefit would be, how UBI would sit alongside or replace existing welfare systems, and how much the system would cost to set up. 

“UBI may be a rare idea that unites some socialists and libertarians but it will take more than popular support to bring it to fruition.”

Notes to editors:

For media enquiries please contact Emily Carver, Media Manager: 07715 942 731.

To download ‘Universal Basic Income: Is it a good idea?’ click here.

Further IEA reading: Should we support a Universal Basic Income?  and Universal Basic Income – do the sums add up?

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.

The IEA is a registered educational charity and independent of all political parties.



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